Deck 7: Macroeconomic Measurements, Gdp and Real Gdp

Question 1

Leisure is

A) a good that is not counted in GDP.
B) a good that is counted in GDP.
C) neither a good nor a bad,and it is not counted in GDP.
D) a bad as far as economists are concerned,because it is not tangible.

Answer 1

a good that is not counted in GDP.

Question 2

To macroeconomists,investment is mainly the purchases of goods and services

A) by businesses.
B) to hold as wealth,such as gold coins or art.
C) to hold as wealth,such as stocks and bonds.
D) in the period previous to the period being studied.

Answer 2

by businesses.

Question 3

Government purchases consist of the total dollar amount(s)spent on goods and services by the

A) federal government only.
B) state governments only.
C) local governments only.
D) state and local governments.
E) federal,state,and local governments.

Answer 3

federal,state,and local governments.

Question 4

Underground activities are not counted in GDP because

A) some underground activities are illegal and the government doesn't want to place,for instance,drug dealers on an equal footing with small businesses.
B) there are no written records of underground activities.
C) of a decision made in the 1930s and no one has gotten around to changing it yet.
D) although it is possible to accurately measure underground activities,it is harder than measuring above-ground activities because with the latter,one doesn't have to dig as deep.

Question 5

In the definition of GDP,the words "total market value" refer to total

A) dollar value at base prices.
B) dollar value at current prices.
C) subjective value.
D) objective value.
E) a and d

Question 6

Gross Domestic Product is computed by using

A) base-year prices.
B) wholesale prices.
C) previous-year prices.
D) current-year prices.

Question 7

The expenditure approach to measuring GDP sums

A) consumption,investment,government purchases,and net exports.
B) sales,revenues,income,and wages.
C) profits,compensation of employees,consumption,and investment.
D) net exports,consumption,wages,and salaries.
E) consumption,interest,net exports,and federal government purchases

Question 8

Which of the following would not be included in the measurement of GDP?

A) a bill from a car mechanic
B) wages of a card dealer working in a Las Vegas casino
C) commissions of a stockbroker
D) the increased value of shares of stock
E) c and d

Question 9

Gross Domestic Product (GDP)is the total market value of all

A) final goods and services produced annually within a country's borders.
B) final and intermediate goods and services produced annually within a country's borders.
C) intermediate goods and services produced annually within a country's borders.
D) final goods and services produced every month within a country's borders.

Question 10

Which of the following is a nonmarket good?

A) the corn you grow in your home garden and consume
B) the clothes you sew and sell to a neighbor who pays you by writing you a check
C) the self-portrait hanging in your den
D) a and c
E) a,b,and c

Question 11

Which of the following statements is false?

A) The market value of all nonmarket goods is omitted from GDP.
B) The sale of used goods is omitted from GDP.
C) The market value of a person mowing his or her own lawn is omitted from GDP.
D) If a good is produced but not sold,it is included in GDP.

Question 12

Which of the following items is a final good?

A) mustard in a deli
B) tin purchased by a can company
C) a sweater purchased by someone in a department store
D) a and b
E) a,b,and c

Question 13

Suppose the total market value of all final goods and services produced this year in economy X is $4 million.Of the $4 million worth of goods,$3 million is sold and $1 million is held in inventory.For this year,the GDP for economy X is

A) $4 million.
B) $3 million.
C) $1 million.
D) $7 million.
E) none of the above

Question 14

Macroeconomists define consumption as

A) purchases by the business sector.
B) wearing away and breakdown of capital goods.
C) the difference between imports and exports.
D) purchases by the household sector.

Question 15

Which of the following is counted in GDP?

A) the trading of 100 shares of Microsoft stock
B) the services of a real estate broker
C) government transfer payments
D) the sale of a used car
E) none of the above

Question 16

Net exports equals

A) exports divided by imports.
B) the sum of exports and imports.
C) exports minus imports.
D) exports during the year.
E) none of the above

Question 17

Which of the following would definitely not be included in the measurement of GDP?

A) value of the services of a painter who paints your garage
B) value of the services of a person who mows his or her own lawn
C) value of the services of a maid who cleans your house
D) value of the services of a plumber who fixes your kitchen sink

Question 18

The two ways of measuring Gross Domestic Product are the __________ approach and the __________ approach.

A) expenditure;income
B) expenditure;national product
C) national product;income
D) real gross domestic product;nominal gross domestic product
E) net national product;personal income

Question 19

Which of the following illustrates double counting?

A) The total market value of the steel used to produce a car and the total market value of the car itself are summed.
B) The total market value of tennis rackets and the total market value of tennis balls are summed.
C) The total market value of picture frames and the total market value of camera film are summed.
D) The total market value of eyeglasses and the total market value of carpet are summed.
E) b and c

Question 20

The best reason economists take only final goods and services into account when calculating GDP is that

A) this is the way things have always been done.
B) they want to avoid the problem of final counting.
C) they want to avoid the problem of double counting.
D) this is the only way things can be done.

Question 21

In the United States,the largest expenditure component in GDP is

A) gross private domestic investment.
B) government purchases of goods and services.
C) consumption expenditures.
D) net exports.
E) none of the above

Question 22

Depreciation refers to a decrease in the value of a good caused by

A) an increase in the price level.
B) a decrease in the price level.
C) "wear and tear" of capital goods over time.
D) the depreciation allowance.
E) a decrease in purchasing power.

Question 23

In the United States,which is the largest dollar figure?

A) national income
B) gross domestic product
C) net domestic product
D) personal income

Question 24

If a person receives a (stock)dividend check,in the calculation of national income this is part of

A) compensation of employees.
B) proprietors' income.
C) rental income.
D) net interest.
E) corporate profits.

Question 25

Disposable income is

A) equal to GDP minus the capital consumption allowance.
B) that portion of personal income that can be used for consumption and saving.
C) the sum of all payments to suppliers of the factors of production.
D) the amount of income that individuals actually receive.
E) another term for personal income.

Question 26

Net domestic product is the total value of

A) all final goods and services produced within a country's borders in a year.
B) only intermediate goods produced within a country's borders in a year.
C) all final goods and services produced within a country's borders in a year minus gross private domestic investment.
D) only intermediate goods produced within a country's borders in a year plus gross private domestic investment.
E) all final goods and services produced within a country's borders in a year minus capital consumption allowance.

Question 27

Investment is equal to all purchases of newly produced capital goods

A) minus changes in business inventories.
B) plus fixed investment minus inventory investment.
C) plus changes in business inventories.
D) plus changes in business inventories plus purchases of new residential housing.

Question 28

An example of income received but not earned is

A) government transfer payments.
B) undistributed profits.
C) compensation of employees.
D) rental income.
E) a and c

Question 29

Capital consumption allowance refers to

A) capital goods being used up in production through natural wear,obsolescence,and accidental destruction.
B) people sending money between countries.
C) the purchase of used factories.
D) the purchase of goods that allow households to consume more services.

Question 30

Which of the following statements is true?

A) Indirect business taxes are a component of national income because when added to the other components of national income,the sum must equal GDP.
B) Indirect business taxes must be subtracted from national income to yield a figure equal to GDP.
C) Indirect business taxes are a part of national income because they are considered a payment to a factor of production.
D) Indirect business taxes are not part of national income because they are not considered a payment to a factor of production.

Question 31

Exhibit 7-1

Refer to Exhibit 7-1.Which of the following summations represents GDP using the expenditure approach?

A) $4,150 + $751 + $850 + $300
B) $4,150 + $751 + $850 - $331 + $300
C) $4,150 + $751 + $850 + $331 + $300
D) $4,150 + $751 + $850 + $331 + $300 - $320
E) $4,150 + $751 + $850 + $331 + $300 - $320 + $111

Question 32

Which of the following statements is true?

A) The main items that comprise indirect business taxes include excise taxes,income taxes,and property taxes.
B) Capital consumption allowance is also known as depreciation.
C) A sales tax is an example of an indirect business tax.
D) b and c
E) a,b,and c

Question 33

Exhibit 7-1

Refer to Exhibit 7-1.What is the value of gross domestic product?

A) $6,062
B) $5,731
C) $3,072
D) $6,382
E) $2,637

Question 34

National income equals

A) wages + salaries + corporate profits + net income.
B) compensation of employees + proprietors' income + corporate profits + rental income + net interest.
C) compensation of employees + proprietors' income + indirect business taxes + rental income + net interest.
D) the monetary value of fringe benefits + tips + wages + profits + salaries.
E) none of the above

Question 35

The largest component of national income in the United States is

A) rental income.
B) proprietors' income.
C) compensation of employees.
D) corporate profits.
E) net interest.

Question 36

Business firms make which of the following two types of investment?

A) foreign investment and domestic investment
B) fixed investment and capital investment
C) investment in stocks and investment in bonds
D) investment in new capital goods and investment in used capital goods to replace "worn-out" capital goods
E) fixed investment and inventory investment

Question 37

To derive net domestic product (NDP)from gross domestic product (GDP),we must subtract

A) depreciation or capital consumption allowance from GDP.
B) gross private domestic investment from GDP.
C) imports from GDP.
D) inventory investment from GDP.
E) the statistical discrepancy from GDP.

Question 38

An example of income earned but not received is

A) welfare payments.
B) Social Security payments.
C) undistributed profits.
D) a and b
E) a,b,and c

Question 39

Exhibit 7-1

Refer to Exhibit 7-1.Which of the following summations represents net domestic product?

A) GDP - $222
B) GDP - $331
C) GDP - $412
D) GDP - $295
E) GDP + $134

Question 40

Personal income is

A) equal to GDP.
B) that portion of national income that can be used for consumption and saving.
C) the sum of all payments to suppliers of the factors of production.
D) the amount of income that individuals actually receive.
E) another term for disposable income.

Question 41

Real GDP is GDP

A) in current-year prices.
B) in base-year prices.
C) in GDP-prices.
D) in that year's prices.

Question 42

Exhibit 7-1

Refer to Exhibit 7-1.What is the value of personal income?

A) $4,252
B) $4,388
C) $5,072
D) $3,996
E) $4,207

Question 43

If in the process of calculating GDP,the market value of all intermediate goods is added to the market value of all final goods,this would

A) overstate the actual value of GDP.
B) produce the correct value of GDP.
C) understate the actual value of GDP.
D) avoid the possible error of double counting.

Question 44

Exhibit 7-1

Refer to Exhibit 7-1.What is the value of national income?

A) $4,351
B) $4,252
C) $4,403
D) $2,996
E) $4,542

Question 45

The standard definition of "recession" is

A) a period of a positive frictional unemployment rate.
B) two consecutive quarters of falling Real GDP.
C) the lowest point in a business cycle.
D) a period of negative inflation.

Question 46

Which of the following would not be included in the calculation of this year's GDP?

A) a headlight bulb purchased at Joe's Auto Supply by Olivia to replace a burnt out bulb in her car
B) a headlight bulb purchased by Ford Motor Co.from a supplier
C) a headlight bulb produced but not sold this year and thus ending up as inventory
D) none of the above,i.e. ,all would be included

Question 47

Real GDP is the value of all __________ goods and services produced in a given year in __________ prices.

A) intermediate;that year's
B) intermediate;base-year
C) final;that year's
D) final;base-year

Question 48

"Economic growth" has occurred if the

A) inflation rate between this year and last year is zero or less.
B) GDP this year exceeds the Real GDP this year.
C) unemployment rate this year is above the natural rate of unemployment.
D) Real GDP this year exceeds the Real GDP of last year.

Question 49

Suppose there are five goods in the economy,A-E.The current-year quantity of each is 10A,20B,30C,40D,and 50E.Current-year prices are $1 for each unit of A,$2 for each unit of B,$3 for each unit of C,$4 for each unit of D,and $5 for each unit of E.Base-year prices are $1 for each good.Real GDP in the current year equals _________ and GDP equals _________.

A) $550;$150
B) $130;$530
C) $150;$550
D) $530;$130
E) none of the above

Question 50

Sophia just bought shares of stock in IBM for $20,000 and paid a $300 commission to her broker.How did this impact GDP?

A) It had no impact on GDP.
B) GDP increased by $300.
C) GDP increased by $20,000.
D) GDP increased by $19,700.
E) GDP increased by $20,300.

Question 51

Exhibit 7-2

Refer to Exhibit 7-2.GDP in 2012 is

A) $49.
B) $51.
C) $86.
D) $92.
E) not possible to calculate without the CPI.

Question 52

In 2011,the U.S.GDP was approximately

A) $15.27 trillion.
B) $5.15 trillion.
C) $10.67 trillion
D) $20.83 trillion

Question 53

The base year is the year

A) in which prices are unstable.
B) in which prices are lowest.
C) in which prices are highest.
D) that serves as a reference point or benchmark.
E) in which nominal output is largest.

Question 54

The typical U.S.business cycle,measured peak to peak,lasts approximately

A) 4 to 5 years.
B) 8 to 10 years.
C) 1 to 3 years.
D) 6 months to 2 years.

Question 55

Exhibit 7-1

Refer to Exhibit 7-1.What is the value of net domestic product?

A) $5,840
B) $5,731
C) $5,650
D) $5,767
E) $6,637

Question 56

Exhibit 7-2

Refer to Exhibit 7-2.Assuming that 1990 is the base year,Real GDP in 2012 is

A) $49.
B) $51.
C) $86.
D) $92.
E) not possible to calculate without the CPI.

Question 57

Exhibit 7-2

Refer to Exhibit 7-2.GDP in 1990 is

A) $49.
B) $51.
C) $86.
D) $92.
E) impossible to calculate without the CPI.

Question 58

Exhibit 7-1

Refer to Exhibit 7-1.What is the value of disposable income?

A) $3,618
B) $4,795
C) $3,727
D) $4,207
E) $4,017

Question 59

Real GDP is always measured in

A) cheaper dollars.
B) quality of goods produced.
C) base-year dollars.
D) nominal dollars.
E) current dollars.

Question 60

A recession is always part of a

A) contraction.
B) recovery.
C) detraction.
D) remission.

Question 61

Which of the following goods is an intermediate good?

A) lettuce that a restaurant buys to put on sandwiches
B) tires that a car company buys to put on the cars it produces
C) a television set that Chi-Mai buys to put in her college dorm room
D) a and b
E) b and c

Question 62

If GDP in year 1 is the same dollar amount as the GDP in year 2,does it follow that Real GDP in year 1 is the same as Real GDP in year 2?

A) Yes,since prices must necessarily be the same in the two years.
B) No,since equal GDP figures do not account for population.
C) No,since prices may not be the same in the two years.
D) Yes,since equal GDP figures do account for a change in the quality of goods produced in the two years.
E) none of the above

Question 63

Which of the following statements is true?

A) Government purchases is the largest component of GDP.
B) Net exports are equal to exports plus imports.
C) U.S.imports refer to the physical quantity of foreign-produced goods that are purchased by residents of the United States.
D) Government purchases includes the spending on goods and services by all levels of government (federal,state,and local).
E) c and d

Question 64

Which of the following statements is true?

A) National income accountants consider the portion of corporate profits that is used to pay corporate profits taxes to be income earned by households but not received.
B) Net domestic product (NDP)is a smaller dollar amount than GDP.
C) Personal income includes transfer payments.
D) b and c
E) a,b,and c

Question 65

The sale of __________ goods is omitted from current GDP because __________.

A) intermediate goods;these goods do not constitute production
B) used goods;these goods were counted in an earlier year
C) illegal;these goods do not constitute economic value
D) b and c
E) a,b,and c

Question 66

Increases in import spending

A) raise GDP.
B) lower GDP.
C) are always balanced off in GDP by changes in exports.
D) may raise or lower GDP.

Question 67

You have data for compensation of employees,proprietors' income,rental income,and net interest.Can you compute national income?

A) Yes.
B) No,since data on indirect business taxes are missing.
C) No,since data on corporate profits is missing.
D) No,since data on the capital consumption allowance is missing.
E) No,since net interest has not been adjusted for profits.

Question 68

Look at the following data: personal income = $4,900 billion;personal taxes = $900 billion;transfer payments = $980 billion.What is disposable income?

A) $3,200 billion
B) $4,000 billion
C) $4,980 billion
D) $1,880 billion
E) There is not enough information to answer the question.

Question 69

An economy produces 10X,20Y,and 30Z in a year.Base-year prices for these goods are $1,$2,and $3,respectively.Current-year prices for these goods are $2,$3,and $4,respectively.What is Real GDP?

A) $180
B) $200
C) $140
D) $240
E) none of the above

Question 70

Which of the following does GDP omit?

A) Jack purchases $2,300 worth of stock in company X.
B) Bob mows his lawn and washes and irons his shirts.
C) Helen receives $4,000 a year in Social Security payments.
D) a and b
E) a,b,and c

Question 71

Suppose you have data on durable goods,nondurable goods,fixed investment,government purchases,exports,and imports.Can you compute GDP?

A) No,since data on services and prices are missing.
B) No,since data on inventory investment are missing.
C) No,since data on inventory investment and services are missing.
D) No,since data on services are missing.
E) Yes.

Question 72

Suppose that in year 1 every adult in the country works 40 hours a week and GDP is $6.7 trillion.In year 2 every adult in the country works 45 hours a week and GDP is $7.5 trillion.Which of the following statements is true?

A) Per-capita GDP is necessarily higher in year 2 than year 1.
B) People are "better off" in year 2 than in year 1 because there are more goods and services in year 2 than year 1.
C) Government transfer payments were higher in year 2 than in year 1.
D) a and b
E) none of the above

Question 73

Look at the following data: durable goods = $200 billion;nondurable goods = $350 billion;services = $600 billion;fixed investment + inventory investment = $200 billion;government purchases = $400 billion;exports = $30 billion;imports = $79 billion.GDP is equal to

A) $1,701 billion.
B) $1,201 billion.
C) $1,859 billion.
D) $1,010 billion.
E) There is not enough information to answer the question.

Question 74

Which of the following is a macroeconomic measurement used to gauge macroeconomic activity?

A) Net domestic product
B) National income
C) Personal income
D) Disposable income
E) all of the above

Question 75

Which of the following is the correct equation for computing personal income?

A) Personal income = National income + undistributed profits - social insurance taxes - corporate profits taxes + transfer payments.
B) Personal income = National income - undistributed profits - social insurance taxes + corporate profits taxes + transfer payments
C) Personal income = National income - taxes
D) Personal income = National income - undistributed corporate profits - social insurance taxes - corporate profits taxes + transfer payments
E) none of the above

Question 76

Look at the following data: GDP = $11,920 billion;investment = $2,100 billion;exports = $500 billion;government purchases = $1,450 billion;consumption = $8,500 billion.What does import spending equal?

A) $630 billion
B) $370 billion
C) $1,320 billion
D) $430 billion
E) $474 billion

Question 77

Look at the following data: consumption = $915 billion;exports = $40 billion;imports = $33 billion;inventory investment = $123 billion;fixed investment = $500 billion;government purchases = $300 billion.GDP is equal to

A) $1,632 billion.
B) $1,466 billion.
C) $1,911 billion.
D) $1,845 billion.
E) none of the above

Question 78

Country A has a higher GDP than country B.What does this mean?

A) It means that on a per-capita basis the residents of country A are relatively better off (in terms of the goods and services they have available to them)than the residents of country B.
B) It means that on a per-capita basis the residents of country A are richer than the residents of country B.
C) It means that more goods and services were produced in country A than country B.
D) It means that the total market value of the final goods and services produced in country A is greater than the total market value of the final goods and services produced in country B.
E) a and d

Question 79

Which of the following statements is false?

A) Domestic income is the total income earned by the people and businesses within a country's borders.
B) National income is the total income earned by U.S.citizens and businesses,no matter where they reside or are located.
C) Corporate profits is the largest component of national income.
D) National income = compensation of employees + proprietors' income + corporate profits + rental income + net interest.

Question 80

Is it possible for a country with a relatively large GDP to have a relatively small per-capita GDP?

A) Yes,since the country with a relatively large GDP could have a relatively large population.
B) No,since countries with a relatively large GDP (such as the United States and Japan)also have relatively high per-capita GDP.
C) Yes,but only under the condition that the country "produces" relatively more "bads" than other countries.
D) Yes,since government transfer payments may be exorbitantly high in the country with the relatively high GDP.
E) There is not enough information to answer this question.